CHANGES AT WESTJET

12 MAR 2018: WestJet Airlines Ltd.'s announcement of a new chief executive, effective immediately, marks an abrupt end to an eight-year run for outgoing CEO Gregg Saretsky, who is retiring just months before the airline is expected to unveil its new ultra-low-cost carrier Swoop, which has been the source of labour disputes between unionized pilots and the company.

Saretsky, 58, is being replaced by Ed Sims, WestJet's current executive vice-president commercial, who has also been appointed to the airline's board of directors. Sims, who has been with the company less than a year, becomes only the fourth CEO at WestJet, which was founded in 1996 as a small discount carrier.

Sims joined WestJet in May 2017 after serving as CEO of Airways, New Zealand's air navigation service provider. He also held senior positions with Tui, Thomas Cook, Virgin Groups and Air New Zealand.

Sudden Departure

Saretsky's departure caught at least one analyst off guard Thursday.

“News of Mr. Saretsky's retirement comes as a surprise to us,” RBC Capital Markets analyst Walter Spracklin wrote in a note.

“Nonetheless, the change appears to be amicable and well-planned, with Mr. Sims being hand-picked and groomed for the job. We note he has an accomplished 30-year career in the tourism and aviation industries.”

The airline's stock fell about five percent on the Toronto Stock Exchange after the CEO departure announcement and a separate release stating the company is reducing some of its previously announced growth targets for the first quarter, ending March 31, including a more conservative estimate for growth in domestic capacity and revenue per available seat mile, one of its key revenue metrics.

“In the near term, we may continue to see a degree of investor apprehension when considering the 1) surprise CEO retirement; 2) the unexpected downward revision to guidance; and 3) the continued complexity of launching Swoop, while embarking on its wide-body growth initiative,” Spracklin wrote.

Time to Go

WestJet declined requests for interviews with Saretsky or Sims, and didn't answer questions about the timing or apparent suddenness of the transition.

The airline said Saretsky and the board came to an agreement that it was the right time to retire, “especially with the comfort that there is a strong successor in place.”

WestJet has precedent for switching CEOs on short notice, although the transition seemed abrupt even by the company's standards.

Saretsky's appointment as WestJet's third CEO - after joining the company in 2009 as vice-president of WestJet Vacations - became official two weeks after his predecessor Sean Durfy announced his departure on March 15, 2010.

Durfy had been WestJet president for a year before becoming WestJet's second CEO in September 2007, succeeding co-founder Clive Beddoe, who remains chairman of the WestJet board of directors.

In the announcement Thursday, Beddoe thanked Saretsky and wished him well in his retirement.

“Gregg has taken WestJet to new heights during his tenure and the airline would not be in the strong position it is without Gregg's business knowledge, drive and work ethic, and his focus on low costs,” Beddoe said.

In WestJet's statement, Saretsky said plans are well under way for the June launch of Swoop and the introduction of Boeing 787-9 Dreamliners.

“I am proud of the many great things we have accomplished together during my time as president and CEO, and I wish WestJet well in the next chapter of its growth and evolution,” Saretsky said.

Under Saretsky's leadership, WestJet nearly doubled its fleet, launched WestJet Encore and started service to Europe.

Labour Pains

But his time as CEO also included the introduction of unions at WestJet, which had long promoted the competitive advantage of having an entrepreneurial, friendly workforce.

The launch of Swoop has put the company at odds with its pilots as they negotiate a first union contract under the Air Line Pilots Association.

The Canada Industrial Relations Board recently ordered WestJet to withdraw a new policy of offering its pilots - now represented by the Air Line Pilots Association - a two-year leave of absence if they go to fly for Swoop.

The ALPA complained that the policy was a significant change in the company's terms of employment and an interference with the union's right to represent the pilots.

A CIRB ruling announced last Tuesday agreed that the policy could pose “substantial irreparable harm to the union” and noted that the alleged violation came during “the sensitive period of collective bargaining.”

A second complaint, of unfair labour practices, has also been filed with the CIRB by the pilot union but a WestJet media representative said on Wednesday that the launch of Swoop is on track for its first flight in June.